8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 14, 2009

VSB Bancorp, Inc.

(Exact Name of Registrant as specified in its charter)

New York	0-50237	11-3680128
(State or other jurisdiction	Commission File	IRS Employer Identification
of incorporation)	Number	No.

4142 Hylan Boulevard, Staten Island, New York 10308

Address of principal (Zip/Postal Code) executive offices

Registrant’s telephone number: 718-979-1100

n/a

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

SIGNATURES

ITEM 2.02   RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 14, 2009, VSB Bancorp, Inc. (the “Company”) reported its results of operations for the quarter ended March 31, 2009 of $373,051 or diluted earnings per share of $0.20. The Company’s return on average assets and average equity were 0.64% and 5.85%, respectively, for the quarter ended March 31, 2009. This information and the accompanying press release were disseminated on April 14, 2009 through the broad distribution of the press release in a manner designed to provide broad, non-exclusionary distribution of the information to the public, but this voluntary report on Form 8-K is being filed so that the public can have a consistent source for earnings releases by searching the SEC’s EDGAR database.

ITEM 9.01   FINANCIAL STATEMENTS AND EXHIBITS

c.	Exhibits – Press Release dated April 14, 2009 of VSB Bancorp, Inc. describing the results of operations for the quarter ended March 31, 2009 is annexed as Exhibit 99.1.
For additional information, see annexed Exhibit 99.1.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April 15, 2009

VSB Bancorp, Inc.
By:	/s/ Ronald Giampaolo
	Ronald Giampaolo
	Vice President and Controller

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press Release reporting results of operations for the quarter ended March 31, 2009.

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EX-99.1

Exhibit 99.1

VSB Bancorp, Inc.
First Quarter 2009 Results of Operations

Contact Name:
Ralph M. Branca
President & CEO
(718) 979-1100

Staten Island, N. Y. —April 14, 2009. VSB Bancorp, Inc. (NASDAQ GM: VSBN), the holding company for Victory State Bank, reported net income of $373,051 for the first quarter of 2009, a 3.1% increase from the first quarter of 2008. The following unaudited figures were released today. Pre-tax income was $692,824 in the first quarter of 2009, as compared to $673,041 for the first quarter of 2008, an increase of $19,783, or 2.9%. Net income for the 2009 quarter was $373,051, or basic income of $0.21 per common share, as compared to a net income of $361,945, or $0.20 basic income per common share, for the quarter ended March 31, 2008.

The $11,106 increase in net income for the first quarter of 2009 was attributable primarily to a more rapid decline in our cost of funds than the decline in our asset yields as market interest rates declined. We experienced a decrease in interest expense of $344,844, the most significant components of which were a $208,895 decrease in interest on time deposits and an $89,040 decrease in interest on subordinated debt because we repaid the subordinated debt on August 8, 2008. In contrast, interest income declined by only $13,015 as a $97,552 decline in interest income from other interest earning assets (principally overnight investments) was partially offset by $88,805 of interest income representing interest owed for a prior period that was paid during the first quarter of 2009 on a non-accrual loan that was reinstated to accrual status. We also had an increase in the provision for loan losses of $245,000 due to a higher level of charge-offs - $350,023 for the 2009 quarter as compared to $93,730 in the same period in 2008 - and a further deterioration of the real estate market and local economy. We are aggressively collecting these charged-off loans in an effort to recover these amounts.

Without the benefit of the interest received in connection with the non-accrual loan reinstatement, interest income on loans remained stable. The average yield declined 33 basis points due to the decline of the prime rate, but that was partially offset by a $4.9 million increase in average loan balances. The prime rate declined from 7.25% to 5.25% during the first quarter of 2008 and continued to decline throughout the rest of 2008 so that the prime rate was at 3.25% at year end 2008 and stayed at that level throughout the first quarter of 2009. The reductions in the prime rate have caused our prime based loans to reach their interest rate floors. These floors have helped to stabilize the interest income from the loan portfolio and were a significant contributor to moderating the decline in interest income. Our investment securities portfolio had similar income stability as our loans, as the 14 basis point reduction in average yield was offset by the $4.4 million increase in average balance in the 2009 quarter.

Comparing the first quarter of 2009 with the same quarter in 2008, non-interest expense increased by $114,313, totaling $2.0 million for the 2009 quarter. The principal increase was a $29,000 increase in FDIC insurance premiums due to an increase in FDIC assessment rates. The FDIC increased its insurance premium rates to banks in 2009 due to losses to the FDIC insurance fund as a result of bank failures during 2008, coupled with additional losses that the FDIC projected in 2009 due to additional bank failures. Recently, the FDIC proposed a 20 basis point special assessment, based on June 30, 2009 deposits, payable on September 30, 2009. If fully implemented, our special assessment would be almost $400,000. The other categories of non-interest expenses increased for various business reasons including increased utility costs, increased costs of collection, and the implementation of an advertising campaign.

Non-interest income increased $47,267 to $613,169 in the first quarter of 2009 due in part to the increase in the per item charge for insufficient fund transactions that went into effect in March 2008.

Total assets increased to $222.7 million at March 31, 2009, an increase of $10.0 million, or 4.7%, from December 31, 2008. Total deposits, including escrow deposits, increased to $197.0 million, an increase of $8.9 million, or 4.7%. The mix of our deposits also changed as NOW increased by $16.8 million and time deposits decreased by $11.8 million from year end 2008. The Bancorp’s Tier 1 capital ratio was 10.51% at March 31, 2009.

Average interest-earning assets and average loans increased by $14.0 million and $4.9 million, respectively, from the first quarter of 2008 to the first quarter of 2009. Average demand deposits, an interest free source of funds for the Bancorp to invest, decreased by $3.8 million from the first quarter of 2008 to approximately 31% of average total deposits for the first quarter of 2009. Average interest-bearing deposits increased by $13.8 million, resulting in an overall $10.0 million increase in total deposits from the first quarter of 2008 to the first quarter of 2009. Average interest-bearing liabilities increased by $8.6 million, which included the decrease in liabilities caused by repaying $5.2 million in subordinated debt in August 2008. The Company’s interest rate spread and interest rate margin were 3.89% and 4.37%, respectively, for the quarter ended March 31, 2009 as compared to 3.13% and 4.07%, respectively, for the quarter ended March 31, 2008. Although a significant part of this improvement was due to the reinstatement of the loan to accruing status as discussed above, our spread and margin were also helped by the effect of interest rate floors on our loans that helped maintain yields when our cost of funds was declining due to lower market interest rates.

Raffaele (Ralph) M. Branca, VSB Bancorp, Inc.’s President and CEO, stated, “We remain in a weak economic environment which has contributed to the increase in our charged-off loans. Despite the increased provision in the first quarter of 2009, we were able to increase our earnings from the comparable period in 2008. We were also able to increase our deposits by almost $9 million and our loan portfolio by $2 million.” Joseph J. LiBassi, VSB Bancorp, Inc.’s Chairman, stated “In this market where capital is a premium, we have been able to repurchase 94,643 of our shares under our stock buyback program and we were able to pay our sixth quarterly dividend of $0.06 per common share for stockholders of record on March 20, 2009. This is a result of our capital strength. Additionally, we have not needed or even applied for any money under the government’s bailout programs. Our strategy and philosophy has made Victory the premier business bank on the Island.”

VSB Bancorp, Inc. is the one-bank holding company for Victory State Bank. Victory State Bank, a Staten Island based commercial bank, which commenced operations on November 17, 1997. The Bank’s initial capitalization of $7.0 million was primarily raised in the Staten Island community. The Bancorp’s total equity has increased to $23.9 million primarily through the retention of earnings. The Bank operates five full service locations in Staten Island: the main office in Great Kills, and branches on Forest Avenue (West Brighton), Hyatt Street (St. George), Hylan Boulevard (Dongan Hills) and on Bay Street (Rosebank).

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to adverse changes in local, regional or national economic conditions, fluctuations in market interest rates, changes in laws or government regulations, changes in customer preferences, and changes in competition within our market area. When used in this release or in any other written or oral statements by the Company or its directors, officers or employees, words or phrases such as “will result in,” “management expects that,” “will continue,” “is anticipated,” “estimate,” “projected,” or similar expressions, and other terms used to describe future events, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date of the statement. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting the Company under the PSLRA’s safe harbor provisions.

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VSB Bancorp, Inc.
Consolidated Statements of Financial Condition
March 31, 2009
(unaudited)

	March 31, 2009			December 31, 2008
Assets:
Cash and cash equivalents	$	29,489,943		$	21,240,223
Investment securities, available for sale		120,401,021			120,288,588
Loans receivable		68,718,740			66,246,652
Allowance for loan loss		(926,583	)		(987,876	)
Loans receivable, net		67,792,157			65,258,776
Bank premises and equipment, net		3,584,229			3,695,822
Accrued interest receivable		720,190			723,473
Deferred taxes		—			525,839
Other assets		684,857			925,007
Total assets	$	222,672,397		$	212,657,728
Liabilities and stockholders’ equity:
Liabilities:
Deposits:
Demand and checking	$	60,174,572		$	58,598,579
NOW		34,464,218			17,636,154
Money market		23,805,412			22,829,789
Savings		13,646,234			12,412,561
Time		64,502,605			76,323,494
Total Deposits		196,593,041			187,800,577
Escrow deposits		439,511			308,872
Accounts payable and accrued expenses		1,710,951			1,344,512
Total liabilities		198,743,503			189,453,961
Stockholders’ equity:
Common stock, ($.0001 par value, 3,000,000 shares authorized, 1,923,884 issued, 1,829,241 outstanding at March 31, 2009 and 1,923,884 issued, 1,882,461 outstanding December 31, 2008)		192			192
Additional paid in capital		9,177,764			9,200,010
Retained earnings		14,980,327			14,714,143
Treasury shares, at cost (94,643 at March 31, 2009, 41,423 shares at December 31, 2008)		(858,863	)		(395,891	)
Unearned ESOP shares		(859,480	)		(901,750	)
Accumulated other comprehensive gain, net of taxes of $1,255,662 and $488,735, respectively		1,488,954			587,063
Total stockholders’ equity		23,928,894			23,203,767
Total liabilities and stockholders’ equity	$	222,672,397		$	212,657,728

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VSB Bancorp, Inc.
Consolidated Statements of Operations
March 31, 2009
(unaudited)

	Three months			Three months
	ended			ended
	Mar. 31, 2009			Mar. 31, 2008
Interest and dividend income:
Loans receivable	$	1,330,706		$	1,244,491
Investment securities		1,382,619			1,384,297
Other interest earning assets		4,741			102,293
Total interest income		2,718,066			2,731,081
Interest expense:
NOW		26,783			32,231
Money market		60,511			96,092
Savings		13,102			18,982
Subordinated debt		—			89,040
Time		310,552			519,447
Total interest expense		410,948			755,792
Net interest income		2,307,118			1,975,289
Provision for loan loss		275,000			30,000
Net interest income after provision for loan loss		2,032,118			1,945,289
Non-interest income:
Loan fees		25,751			22,223
Service charges on deposits		545,862			479,615
Net rental income (loss)		11,517			(1,011	)
Other income		30,039			65,075
Total non-interest income		613,169			565,902
Non-interest expenses:
Salaries and benefits		911,983			910,408
Occupancy expenses		379,081			357,724
Legal expense		74,649			54,086
Professional fees		77,000			61,400
Computer expense		66,800			55,106
Director fees		51,100			57,250
FDIC and NYSBD assessments		75,500			46,500
Other expenses		316,350			295,676
Total non-interest expenses		1,952,463			1,838,150
Income before income taxes		692,824			673,041
Provision (benefit) for income taxes:
Current		425,850			332,900
Deferred		(106,077	)		(21,804	)
Total provision for income taxes		319,773			311,096
Net income	$	373,051		$	361,945
Basic income per common share	$	0.21		$	0.20
Diluted net income per share	$	0.20		$	0.19
Book value per common share	$	13.08		$	11.68

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